I’m Richard Tamlyn and this is Bluestone’s Q3 update for 2021.
Well, we’re out of lockdown – freedom day has arrived and whilst there’s an air of caution, the country is slowly emerging from one of the toughest 18 months in history.
We’ve helped hundreds of businesses remain liquid over lockdown but the last quarter has seen a definite shift in focus with more and more businesses now looking to the future, and activating projects that have been delayed or put on the back burner during lockdown.
April saw a massive backlog of applications for the CBILS loan scheme prior to the government deadline of 31st March. As funders dealt with that, there was a delay to the launch of the Recovery Loan Scheme scheduled by the chancellor to go live on 6th April. The RLS is a government backed loan scheme designed to help businesses bounce back, but in reality it’s been a bit of a damp squib. The Financial Times reported at the end of April that uptake had been 75% down compared to the Bounce Back Loan launched earlier in the pandemic.
Whilst there was a lot of concern and criticism of the government for the scheme’s complexity and higher interest rates, the reality is probably that businesses had borrowed heavily and adequately enough from the initial schemes, and the furlough scheme helped businesses manage their cost base effectively, so maybe the government don’t deserve quite as much criticism as thought?
Whilst many finance applications are complex, here at Bluestone we take all of that away and work with you to coach you through the process and ensure your application is positioned correctly and with as much chance of approval as possible, so if you do need assistance give us a call or follow the link below.
And the slow uptake of the RLS isn’t the only indicator that businesses have weathered the Covid storm in a pretty resilient way. The influx of cash from CBILS has also seen a slowdown in uptake of our other cashflow solutions. Invoice finance, VAT and tax loan uptake are also down across the board, possibly due to the reduction in production and turnover during lockdown, but as businesses look to build back after lockdown and get back in to growth phases, these types of solutions come into their own to unlock capital for marketing, recruitment and other essential costs in the business that enable the growth UK plc is in need of. Give us a call if you’d like to learn more.
The chancellor’s budget has created a real shift in terms of businesses approach to finance and we’ve been recommending many more Hire Purchase agreements to ensure businesses can unlock the super deduction tax savings. That saving means businesses can offset 130% of the value of qualifying assets against their corporation tax bill, an unprecedented move by Rishi Sunak to encourage investment and kick start the business economy post lockdown. HP enables the super deduction savings in year one whilst also being able to spread the payments and keep capital in the business so it’s a great way for businesses to get projects moving in a really cost effective manner.
But alongside that, the corporation tax increase from 1st April 2023 is making leasing an even more attractive proposition. We’re working with a number of PLCs from sectors like big pharma and communications who are now looking at leasing on large scale projects because the Corp tax increase makes leasing a no brainer. For any projects commencing in 2022, spread over 5 years will mean business can recoup 25% of their annual lease payments by offsetting them against corporation tax. On any project ,that’s a gamechanger and more than ever makes leasing the most logical option…definitely not just for businesses who “can’t afford to pay cash”.
So whilst the hike in corporation tax may not be great news for businesses it does make investments more affordable than ever.
We’ve also seen a massive increase in demand for green energy solutions this year. More and more businesses are looking to become more carbon neutral, reduce operating costs and generally become more efficient and environmentally friendly. Whether you’re moving your fleet to electric vehicles, looking to reduce utility costs through solar, LED Lighting or biomass boilers, finance is an absolute no brainer. The savings made from day one often offset the costs of finance meaning you can make the move to being a greener business for a net neutral cost, or in some cases a cash generative position from day one. We work with a number of suppliers in the sector we can recommend, or if you’re already working with a supplier and just want to enquire about financing your project get in touch. We’ll produce some finance models for you based on the forecast savings you’ve been provided with and see just how effective financing your green revolution can be.
Lastly, we’re delighted to have been nominated again in the NACFB Awards’ Finance Broker of the Year category. We won the award last year and it’s fantastic to be recognised for our work in what’s been a turbulent, fast changing and challenging year for the finance sector. Like all things Bluestone, we’ve approached it objectively, ensuring we’ve always put our partners and customers interests at the heart of every change we’ve made to adapt, and making sure we do all we can to look after our brilliant team through what’s been a tough year both in work and out of it.
The changes keep coming but we look forward to helping you build back stronger and making sure your financial strategy is as effective as it can be in delivering your business back to growth.
Thanks for your time, I look forward to seeing you soon.
We are emerging from one of the most heavily controlled and challenging periods in recent history, but while the full societal and economic impact of the pandemic will take time to show itself, UK businesses are facing yet another curveball: ‘The Great Resignation’.
‘The Great Resignation’ is an idea put forward by Professor Anthony Klotz, an associate professor of management at Texas A&M University. Klotz predicted that workers would resign from their jobs in huge numbers once the COVID pandemic is perceived to be over and we return to a more ‘normal’ way of life.
We discussed the topic with Tom Sharp, founder of POST-Recruitment, to discover what (if anything) businesses can do to prepare for (or minimise the impact of) ‘The Great Resignation’.
What’s the theory behind ‘The Great Resignation’?
Before COVID, most people would get up in the morning, prepare to leave their home, commute to a workplace, park themselves at a desk or workstation, stay there until a clock told them that they had finished, commute home again, eat, sleep, and repeat.
Then, on 16th March 2020, everything changed.
Working from home
As the pandemic shifted from ‘media hype’ to a grim reality, Boris Johnson announced that people should ‘start working from home where they possibly can’, and the working from home era began. Initially, we improvised and tried to adapt to it as a temporary situation (hunched over kitchen tables or standing at ironing boards with partners, children and pets taking on the roles of co-workers). Weeks turned into months, and over 16 of them, many of us have made working from home our new normality.
Whatever your personal experience of working from home, the pandemic has opened our eyes and started a conversation. We have seen the benefit of cutting out the daily commute, a more flexible work environment, and a healthier work-life balance. We have found time for hobbies, walking in nature with the family, playing with the kids and being more involved with their education (stressful as it can be). We have bitten the bullet and invested in office furniture for the home, upgraded the broadband, bought home exercise equipment, and found the time to prepare nutritious family meals from scratch. Some people have even added a new baby (or pet) to their household.
Working from home has become normal, so now restrictions are being lifted are employers expecting their teams to return to the old way of working as if the last 16 months did not happen? As if the potentially deadly virus is no longer factor? If so, they can expect a barrage of reluctance or outright resistance.
Psychological impact of the pandemic
Next, add a person’s frustration with their employer refusing to be flexible or showing a lack of concern for their welfare to the fact that they have been living under a constant cloud of uncertainty and anxiety for a prolonged period.
When we feel that we have lost control in an area of our life, it is natural to try and regain it in whatever way we can, and for many, that means changing our job or switching to a new career path altogether. And, thanks to numerous lockdowns, we have had a lot more time on our hands to reflect on our goals and dreams and to discover new interests.
This may push many people to take a professional leap they would not otherwise have taken such as starting their own business or retraining. At the very least, a fresh start in a new job begins to look appealing.
Finally, there will be lots of people who, had the pandemic not happened, would have left their job at some point in the last 16 months anyway, but they decided to hold off until life was more settled and predictable. Now that it looks like that time is coming, those pent-up resignations are coming out of the woodwork.
When we combine all these issues together, the ‘Great Resignation’ looks like more than a theory.
Why should employers be concerned about ‘The Great Resignation?’
Staff resignations are an inevitable part of running a business. They are often a very personal decision and, in many situations, nobody’s fault. However, resignations can also be a warning sign that all is not well, and when a business has a high turnover of staff or several people leaving in a short space of time, it’s wise to indulge in some organisational soul-searching to avoid losing more employees.
When employee turnover rates are high, the consequences can be serious: the organisation loses valuable knowledge and experience, there is a drop in morale for those left, and a potential loss of belief in the organisation’s competence and the team’s ability to perform. Then, when the new team members enter the organisation, they are entering a team that lacks an identity or a sense of collective purpose. Building relationships takes time, and in that time commitment, trust, engagement, and productivity start to fall.
Tom Sharp is the founder and director of POST-Recruitment. He and his team handle recruitment across ecommerce, sales, marketing, creative, IT, business support and finance industries for large national companies as well as one (or two) man bands. We caught up with Tom to find out his take on ‘The Great Resignation’, what candidates are looking for in their post-pandemic roles, and what some companies are doing to retain a strong and productive workforce.
Are you surprised by the onset of ‘The Great Resignation’?
No, there’s a well-known statistic in recruitment that people tend to leave their jobs within 6 months of a significant life event. It can happen even when the employer has gone out of their way to support them, which can be frustrating for the employer. This time, we’ve all been through the same significant life event – the pandemic – at the same time, so it makes sense that the resignations will start to come in at around the same time.
The pandemic really shone a spotlight on employers. The way they responded gave an insight into how much they value their staff and their wellbeing. Some employees were expected to deliver the same levels of productivity without any additional support, while others went the extra mile for their employees from day one.
In other cases, employers were very flexible and understanding towards their employees during the pandemic, but now the restrictions are easing, they are expecting them to return to full-time office-based work and not listening to what their employees want or need. This is particularly frustrating for employees who have proved that they can work productively from home. Eventually, employees will vote for flexibility with their feet.
Have you noticed a shift in what candidates are looking for from prospective employers?
What about employers? Has there been a change in their requirements?
In some cases, yes. We recently recruited for a £70k Leeds-based role. The employer started off saying that they would want someone in the office 2-3 days per week, but then when the right candidate came along and happened to be based in Cornwall, they were willing to reduce that to just one day in the office per month. Geography does not seem to be as much of a barrier as it was before the pandemic. We recruit for several Leeds-based marketing companies who are actively targeting creative professionals in London.
How can employers respond to ‘The Great Resignation’?
If your business has been negatively impacted by resignations in recent months, the first step is to understand why employees are leaving. Some will have undergone personal trauma or a significant change in circumstance which has pushed them towards leaving, and there is very little you can do about that besides showing them compassion and appreciation for their service.
Others, however, will be leaving because they are dissatisfied with something, and if you don’t know what that something is, you cannot make changes that might prevent more people from resigning or that might persuade quality candidates to fill the vacancies left behind.
It is vital that employers encourage their team to be open and honest about their concerns or frustrations so they can focus on improvement in the right places, but here are some of areas that businesses might want to address if they want to retain their staff, and/or attract new recruits.
Flexible working policy
In some cases, employees working from home on a long-term basis may not be suitable for the business model and it is important that employers are clear and upfront about that. If their stance does not sit well with the employee, it may be better for all parties that they go their separate ways sooner rather than later.
Where working from home does not impact the business negatively, it makes sense to continue to give employees the opportunity to work in the way that works best for them. This might mean working at home, in the office, or a hybrid of both.
However, it is important that employers recognise that working from home can have a negative impact on the health and wellbeing of their employees if not done responsibly. In fact, there is a potential risk that employers might be hit with legal action in the future if employees should develop curvature of the spine or other health issues due to inadequate equipment and furniture.
“It can be tempting for employees to work late into the evening or answer emails in their free time, and this can have a significant impact on a person’s ability to switch off from work. We recruit for Asda who have set up time restrictions on emails so that even if someone sends an email at 8pm, it won’t arrive in the recipient’s inbox until 8am the next working day. Communication and collaboration software can also help to keep teams connected, as working from home can become lonely and/or sap employee motivation.”
Tom, POST Recruitment
Technology and software
Communication and collaboration are key ingredients in any successful team. Forward-thinking companies need to give their employees the technology, connectivity, and software that they need to work at their best, whether they are at home or in the office.
Our environment has a significant impact on the workforce’s morale and productivity levels, so if your shared workspace is looking less than its best, your team may be inclined to give less than theirs. For employees who primarily work from home, you might consider offering a furniture allowance or rental system just as you would pay for someone’s travel expenses.
UK Coaching are a great example of an organisation that has invested in a brand-new office space during the pandemic that has been designed to encourage their team to come together, collaborate, and share a sense of cultural identity. Click here to read their story.
Physical health, mental health, and motivation are all inextricably connected. It makes sense, therefore, that companies should consider funding gym memberships, promoting physical activity through workplace programs (e.g., walking meetings, sponsored challenges), running online fitness sessions, or providing home exercise equipment such as treadmills that employees can use during virtual meetings.
Funding your fight against ‘The Great Resignation’
If you are concerned about the potential impact multiple resignations has had, or could have, on your business, or you are trying to attract new recruits, you need to provide them with the environment and support that enables them to thrive.
We know what you’re thinking. All those improvements, sound great, but what post-pandemic business has the cash lying around for a complete office fitout, or to provide new technology, office furniture, fitness equipment across the organisation?
That’s where we come in.
With a bespoke finance solution from Bluestone Leasing, you could invest in new technology, furniture, an office fit out, fitness equipment or other business assets for your team by spreading the cost and keeping cash in the business, as well as potentially unlocking significant tax benefits at the same time.
To discover how a bespoke finance solution could fund the improvements needed to minimise the impact of The Great Resignation’ by retaining and/or attracting the best employees,hit the button below.
If you recognise these words, and the noughties TV character who bit his goateed lip as he said them, you are probably cringing a little right now. Sorry.
But, confused and slightly illogical ideas aside, it is also worth remembering that the same man had previously increased profit in his branch by 17% and cut expenditure without losing a single member of staff (neither of which were his proudest moments, by the way). So, inept and fictional as David Brent was, is there something to be said for a more creative approach to business?
We think so, and have put together a brand new series of articles to put our money where our mouth is.
What do all businesses want? More money in, less money out.
It’s a straightforward concept, but easier said than done. Common strategies include increasing prices, losing staff, expanding your product range, working longer hours, switching to cheaper source materials, or simplifying your service, but none are particularly appealing.
Ideally, your goal should be to increase your income and reduce your expenditure without reducing the quality of your service or product, or impacting quality of life for you or your staff. Some might say that it’s not possible, but with some creativity and the right guidance, we know that it is.
Every two weeks we will be releasing a new chapter with tips, ideas, and innovative strategies on how you can be more creative in your approach to business finance. Each chapter will highlight and explain a different financial tactic that could increase the money coming into your business, reduce the money going out, or both.
At Bluestone Leasing we have been helping businesses across all sectors to grow and thrive through commercial finance for over 25 years, including a few economic recessions and a global pandemic, and we have more than enough experience and expertise to share.
But we won’t be the only ones putting our ideas into the “melting pot” (again, sorry), and we aren’t in the business of preaching where we don’t practice. Several of the chapters will be created in collaboration with clients and partners who are living proof that these creative financial tactics can have a significant impact in the real world of business.
If tips and strategies that will increase the money coming into or going out of your business sounds appealing, click here to subscribe to the Creative Finance series and we’ll let you know when a new chapter has been published.
While most finance brokers are reputable and trustworthy, every industry has its bad eggs. Unfortunately, it is possible to stumble across finance brokers who are lacking in integrity, putting their own interests before what is right for your business, or making recommendations with little regard for how they could impact your business in the long-term.
Whether you are already working with a finance broker and have doubts, or you are considering working with a finance broker in the future, here are 9 red flags that could be cause for concern.
1. They talk down to you
Unless you work in the finance industry a lot of the terminology, acronyms and general jargon can seem complicated. Even people who have been working in the finance industry are continuing to learn throughout their careers. A good finance broker will be able to translate the detail into simple information that is easy to understand, and you should finish your meetings feeling smarter, not confused.
2. They are poor communicators
While a good finance broker is likely to be busy dealing with their many clients, they should still be able to make time for you when they are working on an agreement for you. Brokers who are MIA for days or even weeks at a time and then only offer basic responses are not as invested in your business as they should be.
3. They try to shut others out of the relationship
You might want to include others in your financial discussions whether you have an accountant whose opinion you value or shareholders. If a finance broker attempts to prevent others from getting involved or looking too closely at an agreement, it could suggest they are trying to hide something.
4. They aren’t interested in your business
There is no one-size-fits-all approach to finance and without understanding your business in detail, a finance broker cannot provide the service that you need. The best finance brokers are those who are genuinely interested in your business’ history, present, and future and they will try to uncover as much as they can through research and consultation with you. If your finance broker treats their work like a box ticking exercise, it might be time to find someone with a more personal touch.
5. They say ‘yes’ too much
Every finance agreement is unique which is why the process requires a personal and tailored approach. This also means that sometimes it is not possible to secure exactly what a business wants. Reputable finance brokers will be open and honest from the beginning about what it is realistic, will manage your expectations, and, if what you think you want isn’t appropriate or achievable, they will guide you towards a more suitable solution.
6. They pressurise you into an agreement
Making the right financial decisions for your business is vital to its stability and growth. The job of a finance broker is to get to know your business today and your ambitions for the future, to help you make sense of your options, and, where appropriate, to prevent you from putting your business in financial jeopardy. Your finance broker should inform and explain, but the final decision as to whether to proceed or not is yours alone. If you feel you are being pressured, rushed, or they are ignoring your concerns, take some time to step back and consider your options.
7. They are not FCA accredited
Finance brokers have to be accredited by the Financial Conduct Authority (FCA) if they are providing services to regulated businesses, but not if they are only working with unregulated businesses. However, even if you are not a regulated business, choosing a finance broker who is FCA accredited gives you peace of mind that they are being held to the highest standards by an external body.
8. They are affiliated with a particular lender
Some finance brokers can only offer funding from a particular lender or a restricted group of lenders. This can mean that you are not offered the best possible rates or terms that are available on the market, or that they prioritise a certain lender’s profits rather than what is best for your business. On the other hand, independent finance brokers and those who can access a large panel of funders can offer finance solutions that are in your best interests.
9. They are reluctant to discuss what will happen at the end of the agreement
Once your finance agreement is up and running you will make fixed regular payments over a set term, but what happens when that agreement comes to an end? The answer to that question will vary depending on the type of finance product you have, but you might have the option to return the assets to the lender or finance company, to extend the agreement, or to buy the assets for a fee. It is important that you understand the terms that you are agreeing to, so if your finance broker is reluctant to discuss the end of the agreement in detail, it could be a red flag.
At Bluestone Leasing we’re passionate about helping businesses to grow and succeed. We strive to provide a service level which other finance brokers will struggle to equal, built primarily on long-term relationships, customer success, financial expertise, and innovation.
Our philosophy is to look after ourselves as a team, take care in selecting the best people to join our team, then channel their enthusiasm and expertise into enabling success for our customers. We are not interested in anything other than mutually beneficial finance arrangements.
“We have downsized from 12,000 to 5,000 square feet, but as all the space has been used to the maximum, it works perfectly and almost feels like we have more space.”
With office-based working hanging by a thread for many businesses, why would an organisation invest time and money into brand new offices?
For UK Coaching, the answer was simple: to support and inspire their clients and staff.
UK Coaching’s problem
Our environment has a big impact on the way we feel and behave. When we feel at ease, safe, and energised, we are better thinkers, better communicators, and more connected to the world and the people around us.
UK Coaching is the UK’s leading charitable organisation for sports and physical activity coaches and has been running for over 30 years and employs more than 80 people. They represent, support and inspire coaches to bring great coaching to the lives of millions, building healthier and happier communities in the process.
Although based in Leeds, the organisation works with coaches all over the UK who are improving a person’s experience of sport and physical activity by providing specialised support and guidance aligned to their individual needs and aspirations.
So, when we consider that the team at UK Coaching are responsible for inspiring and nurturing people so that they can inspire others in their communities, surely their working environment should support them in their mission?
Unfortunately, their workplace was anything but inspiring.
UK Coaching was also facing the challenge of bringing their team back to the office after months of remote working throughout the pandemic, as well as providing a more agile and digital workplace that suited the business today.
“We wanted to create a unique working environment that aided collaboration within the business, and allowed enhanced agile work practices, while also future proofing the space. The project would also allow a change in the culture by creating a smarter and more digital workplace that was a great place to work and a more inclusive environment.
“It was important for us to create a ‘sense of place’ and improve the wellbeing of our team, and a workplace that assists in the attraction and retention of talent and makes us stand out from the competition. We needed to provide flexibility for staff to work individually, collaboratively, and innovatively, but also provide privacy when needed.”
Neil Ashton, COO UK Coaching
Enter RA Real Estate
UK Coaching’s project had three key elements:
To find new premises that would facilitate this adventurous project
A solid brief for the desired fit out
To exit the existing property.
To kick things off, UK Coaching appointed Richard Ashmore of RA Real Estate, a commercial property expert in Leeds and the surrounding areas, who helped them to find new premises and develop a full technical brief and tender document for the fitout.
Next on the to-do list in September 2020 was the tender process, i.e., inviting design and build contractors to submit proposals for the project, and that is when they met the team at Absolute Interiors.
Absolute Interiors, a design and build contractor, can fit out any commercial space but many of their projects involve offices, restaurants, and bars. In the current climate, they are working with businesses throughout the UK helping them to create a positive return to the office for their staff.
“We are there to bring our client’s vision to life and facilitate where they want to take to their business. We pride ourselves on our design choices being grounded in research and statistics, not just on aesthetics.For UK Coaching, one of the big challenges was moving the business from 12,000 square feet spread over 5 levels – which was not suited to collaborative working – to 5,000 square feet of flexible co-working space. It was also vital that we gave them a space that represented the brand, somewhere they could be proud of inviting clients, partners, and even family and friends.”
“Without doubt Absolute were the best to present. Not only had they matched the brief perfectly, but they ran the presentation more as a consultation engaging us from the start. The team all presented, and they all came across as knowledgeable, realistic, yet adventurous in terms of what we could achieve on a relatively small budget. Their imagination knocked us out the park.”
Neil Ashton, COO UK Coaching
Financing the project with Bluestone Leasing
When it comes to paying for an ambitious project like UK Coaching’s, while paying upfront in cash is an option, more and more businesses are choosing to be more creative in their approach. As one of our partner companies, Absolute discussed the lease financing option with UK Coaching during the initial proposal stage.
“We always mention the option to finance with Bluestone Leasing at the beginning of the process so that the client is fully aware of their options and can make the best decision for their current budget and future plans.”
UK Coaching decided to consolidate the costs and spread the payments over time via a finance lease.
Absolute Interiors introduced UK Coaching to Patrick Iyoyin at Bluestone Leasing who was able to arrange a finance deal that enabled UK Coaching to get the workspace they needed while still retaining their cash so they could continue to support to coaches in the UK.
“Our aim throughout was to tailor a bespoke finance solution around the specific needs and requirements of UK Coaching. This meant we utilised a banking facility that was flexible to allow for various fitout and furniture assets, but also IT equipment for their digital upgrade.”
Patrick Iyoyin, Regional Account Manager, Bluestone Leasing
UK Coaching’s new offices and the future
The project was finished in March 2021, and while COVID restrictions delayed the team’s ability to make full use of their new space, the results have certainly been worth the wait. The organisation now has an innovative, unique, and agile working environment that includes:
A central break out space
Amphitheatre for pitching to an audience/presentations
Social areas for breaks and evening entertainment
Sound barriers above desks for staff who spend a lot of time on the phone
More private ‘snugs’ for project work or collaboration.
“What Absolute have achieved with the budget is amazing, the added value, the trimmings and the extra details are incredible. We really enjoy the space which is near the city centre amenities and transport links. It is conducive to collaborative work in a digitally minded world, but possibly the most significant achievement made possible by the fit out has been giving people a sense of hope and optimism after an isolating period.
“Just like our new offices, UK Coaching’s future is bright and dynamic. To all intents and purposes, we are a new and dynamic organisation, here for the coach. We will represent coaches as a collective, support their learning and development to inspire their participants and communities to be active.”
Highlander Computing Solutions, has been “making IT uncomplicated” for businesses since 1995. The Sheffield-based company initially focused on providing computer support and repairs for local university students, but today they are an end-to-end provider working with businesses all over the UK. Through cloud services, hardware, software, helpdesk support, and project work, Highlander’s growing team can service companies with anywhere from 5 to 6,000 users.
Highlander is one of our partner companies and is one of an increasing number of businesses proactively offering their customers the opportunity to pay via finance, not just when the customer requests it.
We caught up with their sales director, Owen Hanley, to find out why and how they offer finance to their customers.
1. Keep it simple
“Highlander has a desire to uncomplicate through connecting with people, fixing problems and improving outcomes is rooted in our passion for family – not just for our brilliant team and their loved ones, but the entire community of customers we serve and local organisations that we’re proud to partner with. That’s why we like to keep finance as simple as possible whether talking about the potential benefits of finance with minimal jargon, or using clear, indicative quotes to illustrate how our customers could spread the cost of their IT investments.“
2. Include finance on every quote
“Every quote we produce for our customers includes an indicative example how financing with Bluestone could help them to spread the cost, as well as any other financial benefits or tax savings they might unlock.”
3. Make your finance provider part of your team
“It is important that our sales staff are knowledgeable about finance so they can explain the potential benefits to customers. That comes from training and from having access to support and guidance from a finance provider. Our Bluestone account manager, Ben Howe, will sometimes base himself at our offices so he can work alongside us and train the sales team on the benefits of offering finance to all customers, including those that are cash-rich.“
4. Get your finance provider involved in deals ASAP
“Our Bluestone account manager, Ben Howe, is like an additional salesperson in the business. If a customer is interested in finance, we simply wheel Ben in and he does all the heavy lifting from there. We know that our customers are in safe hands with Bluestone, that they will help the customer to make the best financial decision for them, and we will get paid in full upfront. It’s also good to know that if our customers need to fund more than IT, such as a complete office fitout, Bluestone will be able to organise the finance for that too.“
5. Get your finance provider involved in your plans for the future
“Bluestone can arrange finance for just about any asset or growth project, so it’s worth keeping them in the loop when it comes to your own plans. For example, at Highlander we are planning to scale the business in the coming years, including the implementation of a new sales structure, so that we can reach a wider market with our service. Bluestone will certainly be a big part of making that happen.”
Why your business should offer finance
Do your customers have problems paying for their assets or projects? Do you find that customer deals fall through for due to their cashflow or budgetary constraints? Whatever your business, partnering with Bluestone Leasing will give your customers an alternative to paying upfront in full, spreading the cost of their assets over time, keeping cash in their business, and potentially unlocking tax savings.
While this is great news for your customers, it also has some perks for your business too. Offering finance enables you to overcome customer cost objections (£300 per month sounds much more appealing than £10,000 upfront) and in some cases can increase order values as much as 30%. You can also boost your cash flow as payments are typically made within 48-72 hours of the agreement being made live. Plus, finance removes the risk of not being paid by the customer as you are paid by the lender upfront.
Running a business can feel like swimming against the tide even in a strong economy, but over the last 15 months, it has been more like trying to swim – or at least survive – in a typhoon. To help the UK economy weather the storm, the government has been throwing out ropes, floats and rafts in the form of the furlough scheme, grants, Covid Business Interruption Loans (CBILs) and Bounce Back Loans (BBLs).
This support has been a vital lifeline for many, but with those loan schemes now closed to applications, and restrictions on trade and social activities extended yet again, where can UK businesses turn now? According to the government, businesses that have been impacted by the pandemic should put their trust in the Recovery Loan Scheme (RLS).
However, since its launch on 6th April 2021, relatively few businesses have taken advantage of the scheme. Here we explore why the scheme has not had more uptake and alternative funding options for UK businesses trying to grow.
What is the Recovery Loan Scheme?
In addition to the one-off Restart Grant Scheme that is open to businesses in the non-essential retail, hospitality, leisure, personal care and accommodation sectors, the RLS will currently be open until 31st December 2021, but this may be reviewed at a later date. Businesses of any size can apply for loans from £25,000 up to £10 million, through to the end of this year, and the government will provide a guarantee to lenders of 80%.
While previous schemes were intended to help businesses survive the economic impact of the pandemic, the RLS scheme has been introduced to help viable UK businesses return to some kind of normality and grow.
Key features of the RLS
The loans are 80% guaranteed by the government;
Term loans, overdrafts, asset finance and invoice finance facilities of up to £10 million can be borrowed and supported by the RLS guarantee;
The maximum value of a facility per business is the lower of (i) £10 million; (ii) double the business’ wage bill for the last year available; or (iii) the applicant’s liquidity needs for the coming 12 months (for large enterprises) or 18 months (for SMEs)*.
The minimum facility sizes vary, starting at £1,000 for asset and invoice finance and £25,001 for term loans and overdrafts;
Term loans and asset finance facilities are available on repayment terms of up to six years and overdrafts and invoice finance facilities for up to three years;
For facilities for £250,000 or less, personal guarantees cannot be taken. For facilities above £250,000 personal guarantees may still be required but no recovery action can be taken over a Principal Private Residence and recoveries are capped at a maximum of 20% of the outstanding balance of the facility after the proceeds of business assets have been applied.
*The maximum a business can borrow is also subject to a limit of £30 million per borrower group but private equity and venture capital linked businesses will not be deemed to be included within the definition of ‘group.’
Why aren’t more businesses using the RLS?
In a recent article by the Financial Times RLS applications were reported to be “in the low thousands in the first week with fewer again accepted as potential borrowers”. One of the largest UK banks received “fewer than 500 applications in the first two days”, where they approved close to 2,000 applications in the same period when the bounce back scheme opened in 2020.
At Bluestone Leasing, we speak to UK businesses of every size across a wide range of sectors every day, and it is clear from our conversations that the RLS has not exactly set the world alight. What’s keeping applicant numbers so low?
Impact of CBILS
CBILS provided the lender with a 100% government-backed guarantee, there was no guarantee fee and no personal guarantee for loans below £250,000, and the government made a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees. This meant businesses benefitted from no upfront costs, no repayments for 12 months, and lower initial repayments.
Like the CBILS, no personal guarantee is required for RLS loans under £250,000. For facilities above £250,000 personal guarantees may still be required but no recovery action can be taken over a Principal Private Residence. However, in other ways, the RLS does not offer as much as the CBILS. Loans are 80% backed by the government where CBILS were 100% backed, there is no 12 month payment free period, and interest rates are standard.
Because of its attractive terms, many businesses made use of the CBILS at the height of the pandemic. Businesses may not be as interested in the terms of the RLS, and if a business did make use of CBILS, it may place a limit how much money they can borrow under the RLS.
Note: Businesses should not use the RLS to repay CBILS.
Not intended for struggling businesses
The CBILS was open to businesses that had been negatively impacted by the pandemic. The RLS, on the other hand, is not intended to prop up failing businesses that need an injection of cash to keep them afloat, but for viable businesses that have been impacted negatively or positively by the pandemic. Every lender has their own criteria when it comes to deciding whether to lend money to a business, but if a lender is in doubt about a business’ viability, they may reject their application.
Not widely available yet
Relatively few lenders are offering the RLS. To be able to offer the scheme, lenders need to be accredited by the British Business Bank, and this is taking time to roll out. The RLS is due to close at the end of December 2021 and as many lenders are still awaiting accreditation, businesses may run out of time to take advantage of the scheme. Some lenders have decided not to offer the product and those that have been accredited have only recently finalised their lending criteria.
Potentially more expensive than other finance products
Lenders are charged 1-3% on the RLS scheme. While some are choosing to cover this cost themselves, others are passing the additional cost onto the borrower, which might make it less cost-effective than other finance products.
Which businesses can take advantage of the RLS?
The RLS has the potential to help businesses that have managed to survive the pandemic, and are now ready to purchase assets and invest in growth.
RLS applicants should have strong accounts, healthy cash flow, and be able to prove that they will keep trading, even if they are in a challenging sector which has been greatly impacted such as retail, leisure or hospitality. The RLS could also be a suitable option for businesses that do not have a personal guarantee to offer.
Because it is 80% backed by the government, lenders may request that the RLS be included in a range of finance agreements to reduce their risk, enabling them to lend more money than they would have done without it.
However, the RLS scheme is not the only funding route available to UK businesses, and it is important to weight up all options before making a decision.
If not the RLS, what other funding options are there for UK businesses?
Several businesses that have contacted us about the RLS have ultimately decided to pursue a different finance product such as a commercial loan to bring in working capital, asset finance (hire purchase, finance lease, or an operating lease) to acquire assets, or invoice finance to boost cash flow.
To invest in assets…
Hire purchase: The asset is paid for by the finance company (who will want the VAT to be paid up front which can be claimed back as normal). The finance company then charge a regular payment to the end user (your business). The last payment has an additional option to purchase fee which transfers legal title to the customer. This may also entitle the business to the Super Deduction tax benefit.
Finance lease: The finance company pays the supplier for the assets, becoming legal owners of the assets. The finance company then leases the equipment back to the end user (your business). The payments are charged plus VAT which can be reclaimed as normal. At the end of the agreement, you cancel the agreement with the finance company and pay a one-off infinite rental, allowing you to do what you want with the assets.
Operating lease: The finance company pays the supplier for the equipment and in turn then becomes legal owners of the equipment. They then lease/hire the equipment back to the end user and the payments are charged plus VAT which can be reclaimed as normal.
To improve cash flow or invest in growth…
Commercial loan: The funder provides a business with a loan and in return the company makes regular repayments to cover the loan and interest.
Invoice finance: Invoice finance helps business owners leverage their unpaid invoices, giving them an instant cash injection into the business as the lender will release up to 90% of a business’s invoices straight away. When the business’ customer pays the invoice, the lender releases the remaining 10% to the business minus their fees.
Moving your business forward after the pandemic
There is no doubt that we have lived through one of the most challenging periods in our history, but when the storm has passed, many businesses will make it through even stronger than before. With determination, resilience, the right support and some financial creativity, dry land is in sight.
At Bluestone Leasing, we are an award-winning team of service-focused finance professionals dedicated to our business customers and channel partners. We are specialists in creating bespoke funding solutions that deliver tax efficient growth, often including more than one finance product.
At 9 months of age I was already toddling. I was taking regular breaks and using plenty of furniture to steady myself, but I was up and mobile. Unfortunately, one of my laps of the lounge culminated in me sitting on top of the VCR. I was sans-nappy, and decided that was the moment to, shall we say, relax. This led to an awkward telephone conversation with a woman at Radio Rentals who laughed – quite mercilessly – at my mum’s reason for needing a replacement.
Why am I telling you this charming family anecdote? While researching this article (that was going to be called, ‘The rise of the subscription model’), I found lots of blogs that suggested the idea of subscribing to a service was an emerging trend. Someone born in the digital age might assume that the subscription model is a relatively new concept made successful by the likes of Netflix, Spotify, Birch Box, or Hello Fresh.
But, because they have gleefully told that story at numerous family gatherings, I knew that my parents were making monthly payments for their VCR and TV back in the 1980s. Sure enough, a little research confirmed that paying a regular fee in return for services or products has been around a lot longer than many people realise.
The birth of the subscription model
The earliest description of paying for a service in instalments (that I found) dates back to the 1500s when European cartographers were publishing maps of previously undocumented land that was being discovered, occupied, and conquered. The aristocracy and academics were buying these maps, but always in the knowledge that updated editions would be forthcoming as exploration continued. The map publishers asked customers to subscribe to future versions of their maps, and the ongoing payments funded their ongoing explorations and map production.
The most well-known example of an early subscription model is the newspaper and magazine industry which, as far back as the 17th century, was encouraging customers to subscribe to regular publications to cover overheads and delivery costs. Over the years several different types of subscription models have emerged.
The pursuit of ownership
While paying as we go has been part of our society for so long, we can’t get away from the fact that, in the UK, renting or leasing has been regarded as inferior to ownership. A possible reason for this is that as technology became more affordable, renting/leasing became less common and gradually took on negative connotations; only someone who could not afford to buy something outright would need to spread the cost in that way. Combined with our national perception of property ownership as a symbol of success (not a universal attitude by any stretch), and the concept of renting/leasing became tainted.
However, skip a few frames to today, and our buying habits and attitudes are changing at a faster rate than ever before, more so than many of us realise. We don’t ‘go shopping’ anymore – we ‘are shopping’ at all times. We can make a purchase at any time of day or night, from anywhere in the world with an internet connection. If we cannot afford to pay for it all in one go then and there, we expect to be able to pay in instalments. Maybe we can’t afford £300 or £3,000 today, but £50 or £500 per month for the next 6 months? More than doable.
The rate at which technology moves on, and the fact that we are being marketed to from every direction all day and night, are also major influences on our buying habits. When we buy a product, in a matter of months, a new improved version will be released. We buy products not as long-term investments, but in the knowledge that in a few months or years we will want to upgrade or try something new. There is little point investing in assets that are going to depreciate in value or become obsolete, so paying a large chunk of cash to own something has become less attractive.
The past, present, and future of finance is flexible
It seems that negativity towards leasing in general is fading, but there is a stubborn perception in several industries that suggesting finance to customers will cause offence in some way, i.e., that they will imply they cannot afford to pay in cash. In reality, this is a rather outdated view, as choosing to pay via a subscription model or a finance lease often has nothing to do with affordability.
Service providers that do not recognise the need for greater flexibility are running the risk of lagging behind their competitors. Offering more flexible finance arrangements creates a longer-term relationship with a customer beyond a single transaction, increasing customer lifetime value. This type of arrangement has been working since the cartographers of the 1500s found a way to fund their exploration of the world. It has been enabling individuals, families, and businesses to access the technology they need to thrive, whether that technology is a mobile phone, a VCR or 500 state-of-the-art laptops for their employees.
The subscription model, leasing, and renting technology are not new ideas, and it’s likely that they will continue to benefit both customer and service provider for many years to come.
If you are a business owner wanting to offer your customers more flexible payment options such as a finance arrangement, click here to get in touch.
Online dating has made it easier than ever for us to connect with other people, but it has also made it easier to avoid going all in on a relationship, even when it offers us everything we are looking for.
Take, for example, these two dating profiles.
Sounds like a match made in heaven, doesn’t it? With so much in common, they could be on track for the fairy tale ‘happily ever after’. That’s why it’s such a shame to think that, because of outdated misconceptions, technology providers don’t always end up with a finance partner.
Finance is the perfect partner for a technology provider, but the love is often unrequited. While tech providers may dabble with finance occasionally, it’s nothing serious. Of course, if they don’t get any better offers, finance is there to fall back on, but for the most part they are unwilling to confirm their relationship status.
The sector has regarded finance as a dirty word for many years based on the belief that mentioning it as a payment option could cause offence to a customer. Surely a customer would only use finance if they cannot afford to pay for their technology upfront? Of course, technology providers have always used finance solutions in their sales strategy, but typically only when requested by a customer.
While this reactive “if and when” approach to finance for technology has been common in the past, it is no longer relevant in the modern world, and it is certainly not the future.
Society is changing, and not just because of COVID. We are more comfortable with the idea of spreading everyday costs via finance, from shopping for cars and furniture to buying clothes online. In a post-COVID economy, businesses want to spread costs, and are less prepared to part with a big chunk of cash if they don’t need to.
Combine all this with the fact that businesses live and die by the quality of their technology, and to stay competitive they need to refresh and upgrade regularly, and the result is a growing demand for finance solutions in the technology sector.
Why do customers choose to pay for tech on finance?
Despite the misconception, it’s often not because they cannot afford to pay upfront. In fact, many cash-rich businesses choose to lease their technology as it enables them to:
Spread the cost of depreciating technology in line with its return and useful life via a manageable payment plan.
Keep cash in the bank so it can be put to work for the organisation rather than tying it up in ageing assets.
Bring projects and growth forward by getting the technology they need without budget constraints.
Reduce reliance on primary funders and access specialists banks they often cannot access directly.
Refresh their technology every 3 years, and return the old so it can be reused or recycled.
Lock in software subscription costs, that would otherwise increase annually, for the duration of the lease.
AND…For private sector customers, leasing provides a highly attractive, fully 100% tax deductible solution. Clients subject to higher tax rates, such as professions, have an even greater benefit available.
Customers want and expect to be able to pay on finance, but what does the provider get out of it?
What does the tech provider get from the relationship?
More and more providers in the technology sector are responding to this shift by proactively offering finance as a payment option for their customers. By doing so, they are not just meeting demand, but also unlocking significant benefits for their business.
Do your customers have problems paying for their technology equipment or projects? Do you find that customer deals fall through for due to their cashflow or budgetary constraints? Offering finance as a payment option can provide a solution to those problems and enable your business to:
Overcome customer cost objections, as £300 per month sounds much more appealing than £10,000 upfront.
Increase order values, as customers typically spend 30% more when they lease compared to using capital.
Protect margins, as customers lose sensitivity to unit costs when presented with a total cost per month.
Retain customers as leasing makes renewals much easier than when dealing in cash transactions.
Differentiate yourself from your competition and add value to your proposition.
Enhance your cash flow as payments are made within 48-72 hours of the agreement being made live.
Remove the risk of not being paid by the customer as you are paid by the bank upfront.
Develop more strategic relationships with customers by getting involved with longer-term investment plans.
Happily ever after
More and more technology providers are moving away from the old-fashioned idea that finance is the topic-that-must-not-be-named – unless the customer brings it up first. They are opening themselves up to the fact that the way customers want to buy is changing. They are committing to finance as a routine part of their sales strategy, making it clear that they can tailor payment options to their customers’ needs, and enjoying the benefits that come with it.
Ready to swipe right on making finance work for your business?
We’d love to be your finance partner
Bluestone Leasing is a leading independent finance provider with access to more than 45 funders, and we pride ourselves on our ability to make finance simple and accessible. Here’s how it would work:
You include a finance option on all your quotes – we’ve got lots of tools to help you do this.
If a customer is interested in finance, all we need from you is a copy of your quotation and the customer contact details.
We speak to the customer and make sure all their questions are answered. If they want to go ahead, we secure the credit quickly for them with no fuss.
We raise the documents, get them signed face-to-face, issue invoice instructions to you, and then get you paid 48-72 hours after everything is delivered.
“Are you crazy? It would be too big, out of control and would burn through everything in sight!”
“But what if it was friendly, fully trained, just the right size for your business, and could bring you exactly what your business needs to grow?”
“Well, I suppose that could be useful. Why do you ask?”
When you hear the word ‘debt’, what do you think of? High interest rates? Bankruptcy? Your associations are probably not particularly positive. We regularly hear phrases like saddled with, crippled by or even strangled by debt, and, for people in the UK, it’s a common ambition to become ‘debt free’ by the time they retire.
But if you are a business owner, this negative perception of debt could be holding you back. Debt can be a powerful tool for your business, fuelling growth and enabling financial agility. Of course, like an adorable yet potentially dangerous pet dragon, debt needs to be handled with caution.
Here we explore how debt can be used as a funding tool to grow your business, as well as the concept of the ‘optimum debt to equity ratio’.
How does a business fund growth?
Almost all businesses reach a point when they need to spend money in order to grow, whether they are recruiting more staff, moving to bigger premises, investing in new machinery, or upgrading their technology. With greater resource and more efficient working practices, the business can increase its revenue and profits. Those profits can then be put towards further investment, leading to again higher revenue and profits.
Businesses have two main options when deciding how to fund that growth, and both routes have their own benefits and risks to consider.
Take money out of the business’ equity.
A business might choose to use their equity to invest in growth. While this can be the simplest solution, especially for cash-rich businesses, this tactic is not without risk. By reinvesting equity into the business, they are locking their cash up and (if you’ll forgive the cliché) placing all their financial eggs in one basket. If the business runs into financial difficulty, or they have unexpected costs to meet, without cash reserves, they might be facing a problem.
2. Borrow money from a bank or other lender.
A business might choose to borrow the funding they need from a bank or lender, and repay it over time. This enables a business to keep hold if its cash and spread the cost of a project over time via fixed payments. Of course, this method typically involves paying interest on the amount borrowed, and businesses need to be sure that they will be able to meet all their repayments comfortably.
However, while there are pros and cons to both funding routes, many business owners believe that option 1, taking cash from the business and avoiding debt is the ‘safest’ way to grow. There is also a perception amongst some SME owners that a business that has debts is not doing well, and they need to clear their debt as soon as possible to be deemed successful.
In reality, debt is an essential funding tool for growing businesses, and when their debt-to-equity ratio hits the right spot, businesses can accelerate their growth without taking on too much risk.
The debt-to-equity ratio
Investors, banks, lenders, and other financial institutions expect – and in many cases – want a growing business to have some debt.
Every business has a debt-to-equity ratio. In simple terms, it compares the level of debt to how much equity is in the business. It is one of many financial ratios (known as leverage ratios) and metrics that can be used by banks, investors, and lenders to assess a business’ financial health.
To discover your business’ debt-to-equity ratio, there is a straightforward calculation using two figures found on your balance sheet. Take your business’ total liabilities (what you owe to others) and divide it by your equity (your assets minus liabilities).
Here are some basic examples to represent how debt-to-equity ratios are calculated.
Why is the debt-to-equity ratio important?
Banks and lenders will usually look at your business’ debt-to-equity ratio when deciding whether or not to lend you money, and someone considering investing in your company would want to assess it before making their decision. To a bank or investor looking in from the outside to assess a business’ financial situation, a low debt-to-equity ratio can mean slow growth and, possibly, that the owners are not investing wisely enough. If a business has a high debt-to-equity ratio, they may owe too much money to debtors and could be in financial distress.
But, outside of those scenarios, is the debt-to-equity ratio worth thinking about?
It is useful for SME not only to have an understanding of this metric (as well as accounts payable, cash flow, accounts receivable, and inventory) to keep a handle on their capital structure and to help them make informed decisions about whether to take on debt.
What is a healthy debt-to-equity ratio?
The simple answer to this question is, it depends. Optimum debt-to-equity ratios tend to vary greatly depending on the sector, and what the business is trying to achieve.
For example, businesses operating in the financial industry like banks and other financial institutions borrow money in order to lend it, and transportation, energy, telecommunications, and utilities often have large capital investments upfront, so their debt-to-equity ratios will naturally work out higher (typically between 10-20).
Technology-based businesses tend to have a ratio of 2 or below, while large manufacturing and stable publicly traded companies have ratios between 2-5.
In addition to considering the average debt-to-equity ratio for your sector, it is important to remember that the debt-to-equity ratio does not tell a business’ entire story, and there are many exceptions to the rule. A business might take on a lot of debt in a particular year, but if the borrowing enables them to fund expansion that significantly increases profits and cash flow is healthy, the debt will be repaid quickly and the company will grow.
Businesses that try to keep their debt-to-equity ratio to a minimum for no other reason than they believe ‘debt is bad’ might be shooting themselves in the foot. If a business can only invest in growth when it has enough cash in the bank to buy the assets or invest in a project (while also covering day to day overheads and keeping a precautionary balance in place in case of emergencies) it follows that the business’ growth is going to be somewhat restricted.
So, debt isn’t always bad for business?
It is common for SMEs to try to stay away from debt. After all, who wants the risks involved with inviting a huge uncontrollable dragon into their business? It’s an understandable fear, especially when personal debt carries such negative connotations.
But just think about what you could achieve if you had a perfectly sized dragon working for you. Burning through inefficiency, hunting for the assets you need to grow, intimidating competitors, and strengthening your defences.
The right dragon, or the right level of debt, can be a sure sign of a growing and well-managed business.